Today on the CFF blog we want to take a quick look at how adopting sound financial practices and modeling can make it easier for your nonprofit organization to acquire a loan. We’ve recently published a number of quick primers on various aspects of our impact investment business model, and what your organization needs to do to become loan ready:

As we remind all of the groups who express interest in working with us, even in the nonprofit sector, we live in a world that is structured by finance. While we see concepts like the triple bottom line as foundational to a healthy economy going forward, you must be able to present your vision and long-term potential impact in the language of finance. Impact investors look at social and environmental good, but equally at traditional business measures such as budget, gross margins, profits and losses. Our investors look for:

  • Financial strength
  • Strong management and governance
  • Accurate, timely and audited reporting
  • Focused, detailed and reasonable business plans for future projects
  • Committed, confirmed repayment sources, with contingency plans

You may not think of your nonprofit organization as a business, but in this context, you must act with the efficiency and foresight of a successful business in order to make appropriate use of the resources CFF and its investors can make available to you. In an interview regarding early stage financial modeling for low-income entrepreneurs at socialfinance.ca, Josh Engel and Saurabh Lahoti discuss how the concept of “impact” on clients/customers figures into the profit side of the financial model:

“It is important to communicate to an investor that you completely understand the financial ecosystem of the customer. Facts such as, where and how often does the customer get money and how they spend it enable the investor to understand how the enterprise is solving a problem from a financial perspective. Also, when talking about impact within a financial model, it should be the impact as a result of core business and not as an ancillary benefit […].”

Investors are experts in the world of finance, and they will expect you to show a sufficient level of competence in your budgeting and accounting to assure them of the viability of your organization. While many nonprofits lack the resources to hire on a full-time CFO or even an accountant, CFF offers Financial Coaching (link) sessions with our experienced team that can help you translate your operations into a clear, concise and detailed financial model that will you to better understand where your organization is going, and our investors to understand how their money will help you improve your communities, cities and country.

CFF CEO Derek Ballantyne

 

 

 

 

 

 

 

Derek Ballantyne

CEO